Suze Orman TwitterSuze Orman FacebookSuze Orman YouTubeSuze Orman LinkedIn
View Blog & News List

How to Decide if You Should Loan Someone Money

December 10, 2015 at 12:00 AM

One of the trickiest money issues you will ever have to navigate is when someone you love comes and asks you for a loan. Or if you see someone you love is having a tough time financially and you want to loan them money to help.

What I too often see is that incredibly caring and thoughtful people are blinded by their desire to help, and don’t carefully consider the ramifications of making a loan: for themselves and the recipient. That can just lead to heartache and bigger financial problems.

Before you offer a loan to anyone, make sure you can pass my 3-step Loan Test.

  1. Will a loan really help this person? Do they need a loan because of some unforeseeable problem—a health issue, a layoffor because they have made bad decisions with money and have a big hole to dig out of? If it’s the latter, I don’t think loaning that person money is necessarily going to help. Oh sure, your money might help them pay off some pressing bill, but if they don’t respect money, you and I both know they will likely just fall into more money trouble. Before you ever loan money to someone who has made bad decisions in the past, you need to be assured that they have begun to take the steps to becoming responsible with money. 
  2. Can you honestly afford to help? You are to never ever reduce your emergency savings to the point that it puts your own financial security at risk. You know that I think it is smart to always have eight months of living expenses set aside in an emergency fund. Any loan that reduces your emergency fund below the eight-month threshold is not respectful to yourself. Please don’t do it.
  3. Are you comfortable thinking about the money as a gift, not a loan? I believe all loans should be repaid. That’s how the borrower shows their respect. But from a financial standpoint, if you honestly need the money to be repaid by a certain date, I would question whether you should make the loan.

    When you give money to someone you love, I don’t have to tell you how high the emotional stakes are. Adding a layer of financial stress is dangerous. Think about the “what if” factor. What if the loan isn’t repaid? Not only is that a financial hit, but it likely will put a tremendous strain on a relationship with someone you love. You could be out the money, and on the outs with someone very important to you.

    A good test for you is to ask yourself if you would be okayemotionally and financiallyif the loan was actually a gift that was never repaid. Be honest with yourself.

Tag Cloud

identity theftraising interest ratesInflation BenefitFinancial Solutions For Youfour steps to retirement savings !00% tuition paidloan necessityhealthy gumsPersonal Financetitle insurancebest interest ratesFederal Reservestandard deduction Bill and Pennybudgetmax employer matched 401(k) contributionemployer offered life insuranceheartacheCPI-W8 Rules4 Must Have Documents buying a carhome buying seasonPhyllis Shelton expert long-term care19 years cash flow problemWarner Bros Television GroupHoliday Seasondon't cover cosmetic dentistryreduce interest ratepurely financial standpointprotect loved ones focus on needsFinancial Educatorlong-term care Swap Older Annuities or Life Insurance loan is giftFinancial Power of AttorneySelfish10% donate to charitylowest cost fund optionOverspendingpay high rate off firstcomparison shoppingretirment savings20% equitysave moneycredit cardSelectQuote.com30 year mortgage focus on new truth dream schoolfinancial concernshort term goal Ashley Springermanage student loansbill paying prioritiesCombo Insurance Productsget health insurancederailed planno negativityARM Cautionritual scheduleloan big picture home insurancebest loan deal do not pay allowance for good behaviorraising mortgage rates Interestpublic service loan forgiveness programFederal PLUS loan2016 adjust estimated taxis it true? juggle multiple financial goalsMost Influential Celebrities Listhome buying mistakesterm insurancecredit utilization rateHDHP's are good for youdon't spend Stock InvestmentsEasy Life Insurance marriage inequalitycollege studentGay Couplesburn outincrease emergency savingsbad retirement planningSandy Hook Promiselong term careinterest capitalizationthree year car loanvalue moneyMass Mutualfile taxes quicklycontribute household expenses higher insurance deductiblehigh credit score discountUS Tax Codeknow before you oweno retirement funds for down paymentgrandchild summer job IRA contributionincrease retirement contribution ratealways use all paid time offinterest on student loansborrow each year, capitalization is going to pile up COLAno waiting periodSpendinghealthy retirement weightno fee transferdangerous money seasonpremiumignore 6 month grace period 40% toward financial goalearn allowanceFederal Funds RateFinancial Awarenessletter to suzeoverspend on nights outPBS SpecialHeartmax employee matchstudent loan repayment planat worst still pay 75% benefitcommunity collegeleave a legacydoctors in networkmoney vowsmax benefit coveredsocial security not going brokedental discount plan8 month emergency fundget over life insurance phobiauniversal college accesslower rateopen enrollment review children under 18insurance yearly reviewretirement accountsyours, mine & ourskid borrow firstsidelinedhighest possible benefitcommitfinancial fearshigher monthly paymentsavings pleasureoverspend on dining outFinancial CliffCredit Card Interest Ratehealthy youDeath BenefitFICO Scoreconfidentcredit reportresponsible3 savings buckets real estate mistakeslet them have 50% controlpreexisting condition not coveredhome related tax break bonus Emergency Savingsprescription tierjanuary billswomen live longerStudent Debt20% down paymentMust Have Documentsface your financial fearwomen longer life spanForbes Top 10dental savings plannon conventional routeSuze Orman's Money Warstraditional vs roth 401(k)don't extend mortgage Fundssummer job match income refinanceStaffords this year have a fixed 6.8% interest ratemonthly benefit closing disclosureget credit cardis it necessarybad decisionsSuze Ormanspecial saving accountinitial tax break not enough life insuranceLong Term Care Insurance charges on credit cardpay down car loanhealthy aging Gracebuy down Beautybest interest of investorhigh down paymentautomatic withdraw to savings low down paymentdon't defer interest paymentsCredit scoreSuze changed my lifedon't use allowance as bribehome loan credit score below 740 LTC shoppingCommencement10 year repayment plan emergency fund savings15 year mortgageThe Suze Orman ShowEric Dodge gift up to 14,000no private loansresponsible with moneySuze Orman ScholarshipBaby Boomersholiday spendingbe kind to yourselfWashingtonbe true to yourselfaccelerate dental work6 month waiting periodSchool of Social Workloan no longer than 36monthscan you afford itInfluential CelebrityCory Bookerengaged in financesFinancial Adviceoverspend on giftsUrbana-Champaignage appropriate goalsLegal Guardianpaid vacationteach your child good money habitsPay Off Debt Before Retirement2017 Taxes15-year refinance dealovercome financial fearscost of capitalization calculatorno sneaking in feesStudent Debt Crisishealthy retirement blood pressureWall StreetWilltelevision hostsetup automatic savings withdrawprotect your familysocial security never insolventAdequate Auto and Home InsuranceMoney MarketFICO credit score credit card mortgageBankruptcyincrease retirement savingsGiftsLTCi ASAPCiti Simplicity Card dangerous retirement planmental healthwaive home inspection bidMoneyJose Rodriguezunexpected expenseteens and moneyAmy LacyetBankbetter termscut monthly cable billLTCcouple financesFinal Goodbyerequired disclosurepaying for collegelousy investmentdon't ignore open enrollmentwould you decline a bonushealthy teethlife insurance name trust as beneficiarypaid in fullAuto Savings student loan repayment estimatortax ID theftemotional stakeswomen long term caredental insurance near historic lowsbuy home you can affordRevocable Trusthome budget after tax coststudentmortgage brokerlower interest ratestretch out haircut appointmentspeace of mindIRA contribution gifted moneyretain separate credit cardsTeachnot gender specific shop online guaranteed level term policypoint cost offset by savingsincreased auto insurance premiumcostly insurance mistakeHDHP Durable Power of Attorney for Health Careback-to-school budgetgift not loandebt freecar leasingCollege of Veterinary Medicineno apologyshorter payback periodYoung Adult Veterinary Schoolapproved medical 100% tax-freereduce withholdinggrandparent IRA contribution 2015 record year car salesSave Us Moneymeet monthly same-sex marriagecontribution taxesInfluentialssecured cardStudent Loanmobile apppay credit debt ASAPemployer funding HSAreal estate market2015 financial roadmappay down student loan debtlive below your meansrent vs buycompare provider pricingRoth 401(k)negotiate points with bank or sellercompare monthly expensesadvice for college graduatesswitch to spouse coverageplanHDHP's are not badstay positiveborrowing plan no life insurance financially irresponsibleHow To Build Creditbreakdown projected monthly housing costCD'sdon't buy wantsbetter loan ratesHigh Credit ScoreHDHP/HSAfull retirement ageRichfraudulent returnsuitablebalance transfer calculate dependents annual income needslife insurancestaycationworkaholicMarlo Thomasnew carsecure creditpowerfulHolidayteensAARPHigh FICO Score = Better Rate3 bucket approachlow-cost index mutual fundescrowspring summer debthigh deductible health care planUniversity of Floridahigh FICO scorefinancial independenceLong Term Care premiumsfamily save at least $100 monthlyMoney-Savinglow credit scoreAlarm Clockbuy homesuccessCNBCidentity fraudallowance taskorigination feesPrime Rate Rise 2015term life insurancefederal student loan deferment money-aware childNew american Dream quick closingcar loanrefunditemized deductionSandy Hook Elementary Schooldo you need life insuranceFinancial Systemteach importance of helping othersETF'seight month living expense 50 over 50HDHP'sone credit cardUniversity of IllinoisSuze Orman spouse Kathy TravisSuze approvedMotheraffordable premiumconsider roth 401(k)low mileage discountmarriage financial responsibilityEmployer Matched Contributioncredit management20% down payment avoid feespercentage of women widowed 75-84no late fee 3% debt transferred gay marriage ban end Florida protect and provide for minor child Holiday Shoppinghome ownershipfinancial aidOne Wallet At A Timefile asaplower overall drug costsavingsrising home pricesdebit cardSatisfyingpay interest while in schoolrepay student loansForbesFree Debt EliminatorPrime Rate Increase8 month safety netunsubsidized Stafford loanMinor Children community bankpresident Obamaprotect dependent fiduciarypush yourself to save more for retirementGoodbyelearn good financial choicesFinancial Gift Cliffunder 18 financial giftis it kind?keep a schedulesocial securitykids schedule paymentscommissionshigh premiumsroth irarolloveronly refinance if it paysreferrals cnbc alarm clockpublic service career student loan repayment don't blow tax refundGay Rightsdeath benefit needs for familyautomatic paymentpay 100% cashchildren's bookVital Documentsdeath benefit 20 to 25 times annual incomedepreciating asset long-term care premiumsno tax on withdrawlsaffordabilityForeclosureraise deductiblessave Retirement SavingsFICO at least 720insuranceInvest for savings growthFRAConventional loan PMINew York Lifeearn more on savingsemergency fund Changing LivesCivil Rightsfinancing car adult childrenwomen outlive menMortgage Credit Availability IndexGiftspeak new goalHSA tax savingsFinancialhome buying budget401(k) Contributionscollege graduatesame sex marriage band end Floridabetter loan dealsverify wellness screening and programsmortgage disclosurevalentines dayenjoy saving write new goalschedule vacationannual cost of living adjustmentultimate compounding giftstrained relationshipiffy income740 credit scorecredit unionexercise reguarlysmall changes buying car 2016ARMpermanent life insurance3 step financial road mapmultiple lendersavoid burn outalternative FICO scoreworst financial mistakeretirementdon't do five year car loancreate new truthLong Term Care shoppingprofessional advisorhousing marketadjust allocations property taxAccuQuote.comFederal Stafford loanNewtownphysical healthAARP Social security calculatorautomate student loan paymentsswitch to roth 401(k)zero rate transfer dealsgraduationgift grandchild IRA contributiondon't charge a pennyclosing feeslong term goalExhibitionpay off debtpercentage men widowed 75-84become member maintain standard of livingmortgage interest tax deduction401KRetirement Incomeno splurge no interestbig results financial argumentspositiveraise insurance deductibleFHA loan feeslower mortgage interesteliminate credit card debtcostly legal replace permanent life insurance with termFixed Rate MortgageTelepicturesrequire chore in exchange for allowancedon't derail retirement savingsis it necessary?back door Roth IRALifestyleone annual feePost-Divorce20 year level term pay more than minimummortgageretirement planlower premiumstudent loan debtcut monthly cellular billAmericans don't use all paid vacation timestore credit cardsdoctor no longer in networkage appropriate choredear suzetoo expensive schoolno private loanincentives for health care wellness screeningFinancial Awareness Video Festivaladd teenconfident of solutionanticipated salaryco-sign reduce monthly paymentprovider of financial supportinsurance mistake2016 adjust withholdingsocial worktake actiononly offered while employed Communication Skills monthly dental insurance premiummake saving a pleasureSuze is my biggest mentorcar buying mistakesget the most out of social security 20 to 25 times annual incomeloved ones dependent on incomestudent loan repaymentschool LoveCredit Card Rate IncreaseFiscal ResponsibilityRevocable Living Trustraise your deductiblestandard rateclosing costs 2% of loanbe good examplefinancial goal phraseverify retirement plan with HR or plan sponsortax refund fraudwives should be involved in retirementallowance

View Blog & News List
People First. Then Money. Then Things.
Connect with me on Facebook Connect with me on YouTube Connect with me on Twitter
© 2017 Suze Orman Media Inc. All rights reserved.
 |  Search  |  Sitemap  |  Privacy  |  Terms
Sign Up For E-mail Offers
Open Panel
Close Panel